Slovakia Economic Outlook

October 23, 2018

Recent data indicates that the economy should have recorded another healthy expansion in the third quarter, after GDP growth strengthened in the second quarter on the back of surging fixed investment and a strong performance from the external sector. In both July and August, retail sales expanded at a healthy pace, while the unemployment rate sat at multi-year low levels. This, coupled with sustained consumer confidence throughout the quarter, bodes well for private consumption in Q3. Moreover, exports continued to grow robustly in the first two months of Q3, sustained by solid demand from the EU. In the political arena, the government approved the 2019 budget. It includes a sizable hike in public sector wages, and aims to cut the deficit to 0.1% of GDP in 2019 and to run a balanced budget the following year. A buoyant economy and falling unemployment are expected to translate into higher tax collection, narrowing the fiscal deficit.

Slovakia Economic Growth

Next year the economy should continue to expand at a robust pace. Tight labor market conditions and rising wages are expected to underpin consumer spending, while industrial production will benefit from increased production capacity in the car sector. A sharper-than-expected slowdown in the EU economy represents the main downside risk to the outlook, while a relocation of factories to central Europe following Brexit could add some decimals to growth. Met the why particular panelists project GDP will expand 3.7% in 2019, up 0.1 percentage points from last month’s forecast, and 3.1% in 2020.

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